Lisbon Strategy for Growth and Jobs:
frequently asked questions

Part One: The Commission's December 2007 Strategic Report

What are the main conclusions of the Commission's report?

First, European and national level reforms are delivering results and
contributing to growth and jobs at present and for the future. The national
Implementation Reports demonstrate that Member States have taken many of the
necessary steps to implement their programmes and to reinforce them in the light
of the Commission's assessment last year and of the European Council's
commitments.

Second, it is essential that Member States implement outstanding reforms.
Although there is a broad consensus on what needs to be done, the pace of
delivery has been uneven. Not all Member States have undertaken reforms with
equal determination. Reforms in some areas, such as opening up energy and
services markets and tackling labour market segmentation, have lagged behind.
Some signs of "reform fatigue" have become apparent over the last twelve
months.

Third, both the EU and Member states will need to implement further reforms
to sustain solid economic growth in the future and help the EU withstand adverse
developments in the global economy. For the EU level, action is needed on key
priorities, including a Small Business Act, the creation of a European Research
Area and an affordable patent system, and closing further gaps in the Single
Market in the services and energy industries

What are the main new policy elements in the package? What proposals is
the Commission making to the Spring European Council?

The Strategic Report calls on EU leaders at the 2008 Spring European Council
to give fresh impetus by agreeing a limited number of high-impact actions in the
four priority areas and then by ensuring their governments follow up those
commitments.

These include: increasing high-speed internet access to achieve a 30%
connection rate of the EU population and connection of all schools by 2010;
setting national targets and policies to raise the basic skills of young people
and reduce early school leaving; adopting a comprehensive European Small
Business Act; improving framework conditions for innovation through an
integrated patent jurisdiction and a single affordable patent; completing the
internal market for energy; setting mandatory energy reduction targets for
government buildings; and systematically including energy efficiency as the one
of the award criteria for public procurement.

The package also reinforces the external dimension, combining openness
with the legitimate defence of the European interest. Dialogue with third
countries will be strengthened and streamlined, with a clearer focus on
globalisation issues of mutual interest such as regulatory convergence,
migration and climate change. In future the Commission will adopt a single
annual report on market access, identifying countries and sectors where
significant barriers remain.

The new and innovative Community Lisbon Programme focuses more clearly on the
EU’s own contribution to the four priority action areas referred to above.
It includes among its 10 key objectives, in addition to contributing at European
level to achievement of the new goals the Commission is asking the Spring
European Council to endorse: the rapid adoption by the European Parliament and
the Council of the Commission's "blue card" proposal for a skills-based
immigration policy; further steps to integrate EU financial services markets and
enhance their stability in the light of the current turbulence; and the
promotion of a sustainable industrial policy.

Does this reinforcement of the Strategy set out in the Report require
amendments to the Integrated Guidelines?

No. The above reinforcements do not require amendment of the Integrated
Guidelines agreed unanimously by Member States in 2005, so the Commission is
proposing those Guidelines should be unchanged for the next cycle. However, the
text accompanying them is amended in order to reflect the changes of
emphasis.

The package makes clear in particular the need for an even higher priority
for the social dimension, education and skills, information and communication
technologies, flexicurity, energy and climate change.

What do this year's country specific recommendations cover?

The recommendations the Commission is proposing primarily cover areas already
signalled as needing further attention last year such as fiscal consolidation,
financial sustainability, labour market reforms, competition in network
industries and services, investment in R&D and improving the regulatory
environment. A proposed recommendation signifies that in the Commission's view,
though there may have been some progress, the Member State concerned still needs
to reinforce or speed up its efforts in this area.

On the basis of a Commission proposal, the Council adopted the country
specific recommendations in March 2007. Structural reforms take time to
implement and only a preliminary assessment can take place at this stage. On
this basis, the report maintains most of last year's country specific
recommendations and points to watch.

A full set of the recommendations is available in MEMO/07/569.

What exactly are the changes to the country specific recommendations this
year?

In most cases, steps have been taken towards meeting the commitments
contained in the country specific recommendations agreed collectively by the
Member States last year. However, more remains to be done and most of these
recommendations remain in place. In a few cases - Germany, Italy and Spain - the
number of recommendations has decreased while for Slovakia, last year's
recommendation on tackling long-term unemployment has been replaced with a
recommendation to improve the regulatory environment. No Member States have
additional country specific recommendations. The conclusions of each country
chapter are collected in MEMO/07/569.

What is the evidence that the brighter economic outlook is due to reforms
implemented under the Lisbon Growth and Jobs Strategy?

The Lisbon reforms have not been the only factor. But there is strong
evidence from the Commission's economic modelling that they have made an
important contribution and can make a bigger one in the future. What is more,
reforms have helped increase the underlying potential estimated growth rate of
GDP in the euro zone by 0.2% since 2005 to some 2.25% in 2007: in other words to
improve the long-term prospects for prosperity. A more complete analysis is
available in the Annex to the Strategic Progress Report.

Is the Commission proposing recommendations for every Member
State?

No. For a small number of Member States [Denmark, Estonia, Finland, Ireland,
Luxembourg and Sweden], the Commission did not propose country specific
recommendations in its 2006 report. For this year, there have been no major
development which would warrant country specific recommendations for these
Member States. However, in the country chapters covering these Member States,
as in all the others, the Commission points to policy areas on which it will be
particularly important to focus over the next couple of years.

What are the conclusions of the chapter on the euro area?

The chapter concludes that the euro area countries have engaged in
substantive structural reforms to tackle their economic, social and
environmental challenges, although some have responded more robustly to some
challenges than others. Although important for all EU Member States, structural
reforms are especially relevant for the economies in the euro area. Primarily
aimed at creating more growth and jobs, structural reforms also enhance
integration and the adaptability of euro area economies and synchronise its
business cycles.

Overall, in which policy areas is more progress most needed?

Although there has been some good progress on reducing budget deficits, the
opportunity to use the relatively strong growth conditions to reduce structural
deficits further has not been fully seized, especially in the euro area.

Europe is still lagging behind other leading economies both in investment in
information and communication technologies and in terms of their use to enhance
productivity.

Opening up network industries and services to competition has been slow and
important obstacles to market entry remain. Some Member States lag behind with
the implementation of internal market directives.

There have been important steps forward in implementing the EU’s better
regulation agenda but some Member States need to do more to reduce
administrative burdens and improve the business environments.

Almost 6.5 million new jobs have been created in EU-27 in the last two years
with 5 million jobs expected to be created up to 2009. Yet, many labour markets
remain segmented, with well-protected insiders and more precarious outsiders on
contracts with uncertain prospects.

About half of the Member States have developed - or are developing - policies
on the basis of a flexicurity approach. Yet the policy response remains
fragmented.

While it is encouraging that Member States have now set ambitious targets to
increase R&D spending, the real proportion of GDP spent on R&D in the EU
has failed to keep up with recent stronger economic growth and decreased from
2.0 % of GDP in 2000 to 1.85 % of GDP in 2006, with large differences between
Member States. This moves the Community further away from the EU target of 3%,
although recent policy reforms aiming at boosting R&D spending will take
some time to feed through.

Which Member States are doing best?

The Commission does not want to take a "Eurovision song contest" approach and
rank Member States. This serves no purpose and would depend on subjective
judgements, given that it is not current performance but future potential that
is key. But it is encouraging to note three trends that have continued since
last year.

First, those Member States which rank highly in current international
competitiveness tables, for example the Nordic countries and Ireland, are
resisting the temptation to rest on their laurels. They are aware that
continuing to reform now is the key to maintaining their performance in the
future.

Second, those larger economies whose success is particularly important in
creating prosperity elsewhere in the Union – France, Germany, UK, Italy
and Spain - have all moved forward, albeit from different baselines and at
different stages of implementation.

Third, while most still have much work to do to catch up, those Member States
that joined in 2004 are also moving forward, with visible increases in their
standard of living, though again the pace of progress varies.

Which Member States are doing badly?

All Member States deserve credit for having made progress, often in
challenging political circumstances. It would not be accurate or useful to point
the finger and say a particular Member State is doing badly. But as in previous
years there are big differences in the depth and pace of reform. It is crucial
over time to close this gap because all of our economies are interdependent.
Prosperity in one creates prosperity in others. We are moving gradually in the
right direction, towards a situation where every Member State performs to its
full potential, but still have a long way to go.

Has there been progress in investing European regional funding in
achieving Lisbon Strategy goals?

Yes. Programmes analysed for the Communication "Regions Delivering Lisbon
through Innovation and Cohesion Policy 2007-2013", which forms part of the
package, are an encouraging statement of intent: less developed regions
(Convergence Objective) plan to invest 65% of funds available to them on
Lisbon-oriented priorities, and the others (Regional Competitiveness and
Employment Objective) have earmarked 82% of their investment, exceeding targets
in both cases. Innovation is a major theme, and features strongly in Cohesion
Policy programmes. Keeping up the momentum in policy debate on innovation is a
key objective.

What happens after the Strategic Report?

As usual, the Report will be submitted to EU leaders at the Spring European
Council which will adopt conclusions on the way forward. The European Council is
asked to endorse the country specific recommendations and the reaffirmed
Integrated guidelines which will then be formally adopted by the Council. The
Lisbon Strategy for Growth and Jobs is built on a partnership approach, which
recognises that, to address the common challenges, each level needs to play its
full part. Therefore the action proposed in the Report will need to be
implemented both by Member States and at Community level, where the new
Community Lisbon Programme already reflects this need.

Further Implementation Reports will be prepared by Member States by October
2008. The Commission will present its 2008 Annual Progress Report around the
turn of next year.

Part Two: Background

What is the Lisbon Strategy for Growth and Jobs?

The European Union's Lisbon Strategy to modernize Europe was first agreed in
2000 and relaunched in 2005, with a clearer focus on growth and jobs. The
Strategy is based on a consensus among Member States and organised around 3 year
cycles. It is now making a strong contribution to Europe's current economic
upturn.

If the EU makes the right economic reforms now, it can secure a prosperous,
fair and environmentally sustainable future for Europe. It can ensure that our
economies are well positioned to take advantage of the opportunities offered by
globalisation. It can put Europe in a strong position to cope with demographic
changes that will mean more older people and fewer young people of working age
in our societies.

How does the Lisbon Growth and Jobs Strategy work?

It is based on a close partnership, with a clear division of responsibilities
and a strong emphasis on maximising the synergies between the Community and the
national levels and between different economic policy areas. Member States
undertake reforms at national level based on National Reform Programmes
presented in 2006 and based on the policy guidelines ("Integrated Guidelines")
agreed collectively by all Member States in 2005 and due for review in 2008.
These National Reform Programmes cover a three-year period.

Each year, Member States produce reports on the implementation of their
National Reform Programmes. The latest implementation reports were presented in
October 2007.

All Member States have appointed Lisbon Co-ordinators ("Mr or Mrs Lisbon")
charged with driving the strategy forward in their own Member State and
involving stakeholders in its implementation. The Commission assists, monitors
and assesses this national level reform process.

In conjunction with this, a programme for European level reform – the
Community Lisbon Programme - is implemented.

Furthermore, the 2006 Spring European Council agreed four priority areas as
the pillars of the renewed Strategy (knowledge and innovation, unlocking
business potential, investing in people and modernising labour markets,
energy/climate change).

It also agreed on a number of actions, such as making it possible anywhere in
the EU to start-up a business within one week or less. Progress on these actions
has been good.

In March 2007, the Spring European Council took a further important step by
endorsing country specific recommendations – proposed by the Commission in
its December 2006 Progress Report - for the first time. These are Treaty based.
By endorsing them, Member States have agreed collectively on what each needs to
do. The Commission's assessment of progress at national level focuses - this
year and in future – particularly on the implementation of these
recommendations and of the other "points to watch" included in the country
chapters.

What is the structure of this year's Report? What are the components of
the package?

The first part of the report to the 2008 Spring European Council sets out the
Commission's proposals for taking the Lisbon Strategy forward during the next
three years.

The second part consists of an assessment of progress made by each Member
State (and the euro area) in the implementation of its National Reform Programme
(NRP) and country-specific recommendations, as adopted by Council.

The Commission’s Strategic Report is based on its assessment of the
Member States autumn 2007 Implementation Reports, on its general monitoring of
progress and bilateral contacts with Member States, and on the
Commission’s own review of progress with the Community Lisbon
Programme.

A detailed assessment of progress by policy area can be found in a companion
document. The Lisbon package furthermore contains:

a proposal to update the country-specific recommendations and 'points to
watch' adopted by the Council in May 2007 (see ;

a proposal for a Council recommendation to re-affirm the Integrated
Guidelines for growth and jobs for the next three-year cycle;

a renewed Community Lisbon Programme for European level action for growth
and jobs, more clearly focused on the four priority areas agreed in 2006:
investing in people and modernising labour markets, improving the business
environment, especially for SMEs; knowledge (education, R&D and innovation);
energy and climate change.

an analysis on the reorientation of the structural funds in support of
growth and jobs.

Why is this year's report called a Strategic
Report, and not an Annual Progress Report as in previous years? What are the
differences from last year?

This report marks the transition to a new cycle in the implementation of the
Lisbon Growth and Jobs Strategy, from 2008-2010. It therefore takes stock of
progress over three years, draws lessons and proposes policy lines for the next
few years – in other words, it has an enhanced strategic component. It
also includes proposals for the reaffirmation of the Integrated Guidelines
– which have worked well as broad drivers of policy - and for changes to
the text accompanying those guidelines, to reflect the need to update the
Strategy in the light of experience so far and to respond to changing
circumstances.

The other differences from last year are that the Report for the first time
includes country assessments for Bulgaria and Romania, and that it is
accompanied by a renewed Community Lisbon Programme.

What are the main achievements so far under the Community Lisbon
Programme?

The first Community Lisbon Programme for 2005-2008 generated significant
results. For example, significant progress has been made towards improving the
legal framework of the single market, through the adoption of the Services
Directive and the implementation of the Financial Services Action Plan. The
Commission has also successfully driven forward its better regulation agenda to
cut unnecessary costs and remove obstacles to innovation.

Substantially greater amounts of Community funding have also been made
available for growth and jobs. The new regulatory framework for the Cohesion
policy programmes will make some €210 billion available for investment in
growth and jobs over 2007-13, an increase of over 25% compared to 2000-06.
Overall 87 actions of the 102 announced in the original 2005 CLP had been
delivered by mid-2007.

How is it possible to assess the performance of "new" and "old" Member
States, or large and small ones, according to the same criteria?

It is not possible and we have not tried. We recognise that each Member State
has a different starting point and different traditions. We are not assessing
their current economic performance as such but progress in implementing and
reinforcing their National Reform Programmes – in other words in getting
in shape for the future, to take advantage of the opportunities of globalisation
and to meet the challenges of ageing populations. Thus, the assessment for each
Member State is based on the implementation of their own National Reform
Programme.

Is there a correlation between the number of recommendations and how well
the Commission thinks a Member State is doing?

Clearly the Commission only proposes a recommendation where it thinks that an
important challenge exists and that the Member State concerned needs to step up
its efforts to meet that challenge. So if there are several recommendations,
this means there are several important challenges. But there is not necessarily
a direct correlation between the number of recommendations and the overall level
of progress.

Even for Member States with no recommendations, the Commission points out
areas where there a particular effort is needed and which therefore could give
rise to recommendations in the future. A Member State with one recommendation in
a key area may need to address that area particularly urgently, to avoid
progress in other areas being held back. And while a Member State with several
recommendations clearly faces a range of tough challenges, it may also be doing
well in some areas. The country chapters identify significant strengths in every
national programme.

Many people are not aware of the Lisbon Strategy. What can be done about
this?

The Commission will continue to reinforce its efforts to get the message
across – directly or in cooperation with stakeholders - to a wide public
that the growth and jobs strategy is a positive vision of wider opportunity, not
a message of doom, gloom and austerity.

But for this to succeed, it is essential that Member States also make
stronger efforts to inform stakeholders and citizens of the importance of the
Growth and Jobs Strategy, and in particular to demonstrate that as a result of
the interdependence of Europe's economies, successful reform in one Member State
contributes to prosperity everywhere. All Member States, even those already in
the vanguard of reform, have a strong interest in the success of the
Strategy.

Within the context of the implementation of the "Communicating Europe in
Partnership" Agenda (see IP/07/1435),
and in particular in taking forward voluntary management partnerships with those
Member States who wish to do so, the Commission will encourage Member States to
give a very high priority to the Growth and Jobs Strategy. It will do the same
in working with other EU institutions, notably the European Parliament, the
Economic and Social Committee and the Committee of the Regions.

It will also continue to lay a strong emphasis on consultation, ownership,
and communication in evaluating progress at national level. This aspect is
covered in every country chapter.

Why is the Strategy now more clearly focused on Growth and Jobs?

Growth is not an end in itself, but it is a prerequisite for being able to
maintain and increase Europe's prosperity and thus for preserving and enhancing
our social models.

Growth must be sustainable – while there is sometimes a short-term cost
to protecting the environment, in the long term the costs of not tackling
environmental issues such as climate change would be far greater.

We need more jobs for two reasons – first because far too many people's
lives are still blighted by unemployment and second because only by getting more
people into work can we ensure that our societies cope with demographic change.
Older populations mean higher pensions and health care costs and those need to
be financed by the working population.

In a nutshell, what are the most important steps for achieving more jobs
and growth in Europe?

There are many pieces in the jigsaw puzzle. It is the whole policy mix that
counts. We need to make Europe a prosperous, low-carbon society.

That means budgetary sustainability, better regulation and the right tax and
benefit systems. We need to improve education and training to allow more people
to reach their full potential, for their own sake and that of society as a
whole. We need to invest in research to maintain our comparative advantage
relative to competing regions.

We need more competition to make sure that research feeds through into real
innovation, as companies strive to stay ahead in highly competitive markets. We
need to make our economy more adaptable to change and more resistant to external
shocks. This need has been further highlighted by the recent trend for high
commodity prices and by financial market instability at global level.

We need more people of all ages in employment to finance social spending as
our populations age. We need to use energy more efficiently and sustainably and
to negotiate better with countries which supply us with energy. We need to
tackle climate change at home and act globally to ensure that responsibilities
in this are taken worldwide.

All of these things require European and national level reforms.

What are the main targets under the Growth and Jobs Strategy?

Before the 2005 relaunch, there were too many disparate targets. Although
Member States are encouraged to set their own targets in several areas, we now
have a streamlined and simplified process with only two EU level headline
targets,: investment of 3 % of Europe’s GDP in research and development by
2010 and an employment rate (the proportion of Europe’s working age
population in employment) of 70% by the same date.

Of course, these are not the only issues that matter – but achieving
both is absolutely central to getting our economies into shape for
globalisation.

And there is progress towards both of them. All Member States have set
ambitious R&D targets and most have undertaken important reforms to help
them get there. If all of these targets are met, the EU will reach an R&D
level of 2.6% of GDP in 2010 (up from 1.9% in 2005). This would be a significant
improvement even if the key EU target of 3% (with the private sector
contributing 2%) is only reached later.

Employment rates are expected to rise to around 66% in 2008 compared to 63%
in 2004. This leaves us with more work to do to reach the ambitious 70 % target
for 2010 but remains important progress.

Has the management of the Strategy always worked in this way?

No. The Strategy was relaunched in 2005. Before that there was more
complicated system with a plethora of different targets and reporting mechanisms
and fewer synergies between the different strands. Some progress was made but
overall the results were not fully satisfactory. So the Commission proposed a
relaunch, based broadly on the recommendations of a mid-term review led by
former Dutch Prime Minister Wim Kok. EU leaders agreed to this proposal at the
2005 Spring European Council.

Why do we need a European strategy when many of the necessary measures
have to be taken at national level?

Our economies are interdependent. Prosperity in one Member State creates
prosperity in others. Sluggishness in one Member State holds others back. So
Europeans need to work together to achieve economic reform, sharing policies
that work.

In addition, national policies alone are not enough to allow the Growth and
Jobs Strategy to succeed. European Union policies are also central to the
Strategy. For example, an efficient internal market, the right policies on
external trade, the updating and enforcement of EU competition law,
well-targeted European research programmes, the effective use of EU Structural
and Cohesion funding and the application of EU environmental policies are all
crucial to delivering the prosperous and modern society which is the ultimate
aim of the Lisbon Strategy. The Community Lisbon Programme sets out the EU-level
priorities for the next three years.

What is the Commission’s role in the governance of the
Strategy?

First, it proposes the Integrated Guidelines for reform, which are then
approved by the Council and form the broad basis for Member States’
National Reform programmes.

Second, in its Annual Progress Report the Commission assesses the content and
implementation so far of National Reform Programmes, allowing stakeholders and
citizens to see how far each Member State has got.

Third, it works continuously with Member States to help them exchange
experience, learn from each other and implement, update, and improve their
National Reform Programmes, taking into account the strengths and weaknesses
identified in the Annual Progress Report. This role as a catalyst for mutual
learning, building consensus that feeds into national as well as European
policies is sometimes low profile, but has been central to the Commission's work
since the European Community began.

Last but not least, the Commission ensures through its role in driving
forward the Community Lisbon Programme that policy making and funding activities
at European level best serve the goals of growth and jobs.

What is the link between the Growth and Jobs Strategy and regional policy
and the Structural Funds?

The link between the Growth and Jobs Strategy and the Structural Funds is
very close and this is clearly demonstrated by the inclusion in this year's
Strategic Report package of the communication entitled "Regions Delivering
Lisbon through Innovation and Cohesion Policy 2007-2013". This assesses the
extent to which new Cohesion Policy programmes aim to move forward the
implementation of the renewed Lisbon Strategy, notably by respecting a
commitment to earmark funds for growth and jobs.

In a single market, structural and cohesion funding will be spent on
procuring works, goods and services from all over the EU. That will benefit all
Member States and not just those directly receiving the most substantial amounts
of structural funding.

The Commission continues to encourage Member States to ensure that regional
aspects are fully taken into account in National Reform Programmes and that
regions are consulted on the development of the programmes. This is the case in
most Member States.

Is the EU maintaining its target of becoming the most competitive
knowledge-based economy in the world by 2010?

The key aim is getting into a rhythm of high sustainable annual growth and
low unemployment by 2010. If, for example, the US does even better that will not
mean the EU strategy has failed. Rather, it will be good news for us all.
Nevertheless, it is crucial that Europe closes the competitiveness gap with the
US – that goes hand in hand with getting the EU in shape to benefit from
globalisation.

What matters in the end is that we in Europe can maintain and enhance our
quality of life – and that of our children and grandchildren – in
the context of globalisation, demographic change and environmental challenges.
That is what the Lisbon Strategy is ultimately about. And it is working.